An interest rate is an amount charged by a lender to a borrower for the given monetary support in the form of debt. Based on the principal amount, the interest rate is calculated in percentage. Interest rates are equated as per different periods, such as monthly, quarterly, or bi-annually. The annual interest rate is applied over one year. A fixed interest remains constant throughout the loan tenure, whereas a floating rate of interest can fluctuate. Longer the tenure higher will be the interest paid.
The interest rate calculator helps in instant calculation of monthly instalments on your loan. It makes it easy to plan the repayment better. If you want to set the EMI as per your budget, it is flexible to adjust the interest rate to derive a suitable figure. The interest rate and loan tenure majorly influence your loan EMI. Borrowers holding a good credit profile usually get the best interest rates.
Interest rates are of different types that are levied differently on various types of the loan amount you borrow:
The kind of interest rate you choose becomes very important for balancing your budget and financial plans. While technology has altered the way loans are being disbursed, some factors that affect your interest, such as type of interest rate, credit scores, down payment, and loan type. So, borrow money wisely that you can repay easily, even with the interest rate charged.
Borrowing money or a loan from financial companies can fulfil your life goals. But, avoid borrowing the principal amount more than you can repay the interest rate.
Simple interest is a one-time rate of interest on the principle amount without any accumulation of interest over the given period of time. Compound interest is acomplexed interest which is commonly levied by financial services and organizations.
Simple interest is calculated on the principal amount of loan, whereas compound interest is computed on the principal amount and also on the accumulated interest rate over a period of time.
Compound interest can work against you and land you in debt, if the loans borrowed are levied with very high interest rates.
For example: a credit card balance of Rs.1,39,000 carrying an interest rate of 24% compounded monthly would result in a total interest rate of Rs.33,360/ annually or Rs.2780 monthly.
The end goal is to acquaint yourself with the basic concept of simple and compound interest rate, that will guide you to make better financial plans, saving your money and increasing your net worth over time.
The fixed interest rate remains static throughout the load period, whereas the variable interest rate is known as the floating rate and keeps changing as per the fluctuations in the market. A fixed interest rate is generally higher than the variable rate. Borrowers charged with variable interest may notice an increase in their interest rate while those with fixed interest remain unaffected to market changes. Initially, if the interest rate is less and likely to increase in the future, it is best to lock your loan with the fixed interest rate.
Also known as the Loan EMI calculator, interest rate calculator is a useful tool tocalculate loan EMIs and the interest rate levied on it. Knowing the interest rate beforehand can save borrowers from the financial burden of loan repayment and avoid delay in clearing EMIs.
Various instant loan apps are available easily on the Play Store. Hence, accessibility to loan calculators and interest calculators is easy, giving out quick and accurate results in no time.The following three factors influence loan EMI and interest rate:
To set the loan EMI and interest, loan calculators allow you to flexibly adjust the above variables and derive a suitable figure.
Interest Rate Formula
There are different formulas applied to determine a rate of interest, whether it is simple interest or compound interest:
Simple Interest Rate:
P x R x T ÷ 100,
P = Principal,
R = Rate of Interest
T = Time Period of the Loan in years.
Compound Interest Rate: P (1 + r/n) ^ nt P is the principal amount, r is the rate of interest per annum, n denotes the number of times in a year the interest gets compounded, and t denotes the number of years.
The benefits of loan interest calculator are many; the tool is immune to errors as compared to standard calculators used for manual calculations. The loan interest calculator can be used for any type of loan, such as personal loans, home loans, car loans, business loans, etc.
Here are some key benefits of using a loan calculator for equating interest and EMIs:
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Interest is the cost of borrowing money. Interest on the loan is the additional money to be repaid in addition to the original loan balance.
Use the interest calculator to know how much interest you are paying. Apply the below formula to calculate loan interest:
Calculate the monthly interest on a loan by dividing the annual interest rate by 12. Divide the derived amount by 100 to get a percentage in decimal. Example: 5% interest becomes 0.05.
The loan interest calculator works simply on two prominentfactors: principal loan amount and loan tenure.
Interest can be simply calculated using the formula:
P x r x t ÷ 100
P = Principal
r = Rate of Interest
t = Term of the loan/deposit in years
You can acquire a low rate of interest on the loan by:
If the interest rate remains constantthroughout the loan borrowing period, you can say it is a fixed rate of interest.
Loan interest calculator is a freely available tool offering user benefits such as: